Auditing and Attestation- Certified Public Accountant (CPA) Practice Exam -

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When qualifying an opinion due to accounts receivable confirmation issues, what should the report indicate?

Departure from generally accepted auditing standards.
Possible effects on the financial statements.
Limitation on the auditor's scope.
Lack of sufficient appropriate audit evidence.

The correct answer is: Possible effects on the financial statements.

Qualifying an opinion due to issues encountered with accounts receivable confirmations indicates that there are some uncertainties that could influence the overall accuracy of the financial statements. When an auditor issues a qualified opinion, this reflects that the auditor is concerned that certain transactions or account balances may not be fairly presented due to the lack of confirmation. In this context, indicating possible effects on the financial statements allows users of the financial statements to understand that there may be implications arising from the issues faced during the confirmation of accounts receivable. This guidance helps stakeholders gauge the reliability of the financial statement information, especially regarding the accounts receivable balance that might not accurately reflect the amounts collectible. By identifying these possible effects, the auditor is providing valuable insight into the areas of concern, allowing for a better-informed assessment of the financial position of the entity in question, while also acknowledging the limitations encountered during the audit process. This aligns with the auditor's responsibility to communicate significant issues that could influence the judgment of users.